Coupon blending of a swap portfolio

• US 10,319,032 B2
• Filed: 07/22/2014
• Issued: 06/11/2019
• Est. Priority Date: 05/09/2014
• Status: Active Grant

• Current Assignee: Chicago Mercantile Exchange, Inc. (CME Group Incorporated)
• Original Assignee: Chicago Mercantile Exchange, Inc. (CME Group Incorporated)
• Inventors: Zhan, Wansu, Bawadhankar, Dhiraj
• Primary Examiner(s): Niquette, Robert R
• Application Number:
  US14/338,080
• Publication Number:
  US 20150324914A1
• Time in Patent Office: 1,785 Days
• Field of Search: 705 36 R, 705 35- 45
• CPC Class Codes: G06Q 40/04 Trading; Exchange, e.g. stocks, commodities, derivatives or currency exchange

Abstract

Systems and methods for blending a plurality of swaps may include determining a fixed rate for use in blending a plurality of swaps, each of the plurality of swaps having matching economics and a different associated fixed rate. A computing device may determine a first remnant swap and a second remnant swap to blend the plurality of swaps using the determined fixed rates. This may reduce the gross notional and/or the total clearing line items associated with the original swaps. In some cases, the computing device may determine one single swap for blending the plurality of swaps.

Claims

1. A method comprising:

accessing, via a network, a portfolio of swaps by a clearinghouse computing system, wherein the portfolio comprises a plurality of line items stored in a memory of a financial institution computing system;

monitoring, by the clearinghouse computing system, a total number of the plurality of line items stored in the portfolio of swaps to identify whether the total number of plurality of line items stored in the portfolio meets a specified criterion that identifies a maximum number of line items to be stored in the memory of the financial institution computing system;

determining, by the clearinghouse computing system when the total number of the plurality of line items stored in the portfolio meets the specified criterion, at least a first fixed rate for use in blending a plurality of swaps within the portfolio based on a fixed rate associated with each of the plurality of the swaps, wherein each of the plurality of swaps has similar financial terms and a different associated fixed rate and the first fixed rate is stored in at least one line item stored in the plurality of swaps;

determining, by the clearinghouse computing system, a first remnant swap using the first fixed rate;

determining, by the clearinghouse computing system, a second remnant swap using a second fixed rate, wherein the second fixed rate may be different than the first fixed rate; and

compressing, by the clearinghouse computing system, the portfolio of swaps stored in the memory of the financial institution computing system into the first remnant swap and the second remnant swap, wherein the total number of the plurality of line items of the portfolio stored in the stored in the memory of the financial institution computing system is reduced from at least the maximum number of line items identified by the criterion to a first line item associated with the first remnant swap and a second line item associated with the second remnant swap.

2. The method of claim 1, wherein determining at least the first rate comprises:

determining a maximum of rates associated with the plurality of swaps.

3. The method of claim 1, wherein determining at least the first rate comprises:

determining the first fixed rate and the second fixed rate so that a gross notional amount may be minimized.

4. The method of claim 1, wherein determining at least the first fixed rate comprises:

determining at least one of the first fixed rate and the second fixed rate based on a current market rate for a quoted swap having matching economics to the plurality of swaps.

5. The method of claim 1, wherein determining at least the first fixed rate comprises receiving a user-entered rate value for at least one of the first fixed rate and the second fixed rate.

6. The method of claim 1, further comprising:

determining a weighted notional value associated with each of the plurality of swaps, wherein the weighted notional value for a particular swap is determined based on the fixed rate associated with the particular swap and a notional value associated with the particular swap.

7. The method of claim 6, further comprising:

determining a notional value associated with the first remnant swap using the first fixed rate and a sum of weighted notional values that are associated with each of the plurality of swaps.

8. The method of claim 1, wherein determining the second remnant swap comprises:

determining a trade having the second fixed rate and a notional value equal to a difference between a sum of notional values of the plurality of swaps and a notional value of the first remnant swap.

9. The method of claim 1, wherein determining the second remnant swap comprises:

determining a notional value associated with the second remnant swap based on a notional amount associated with the plurality of swaps and a notional amount associated with the first remnant swap.

10. The method of claim 1, comprising:

obtaining the plurality of swaps from a data repository of a financial institution;

comparing a count of the plurality of swaps to a criterion; and

blending, responsive to the count meeting the criterion, at least a portion of the plurality of swaps using the first remnant swap and the second remnant swap.

11. The method of claim 1, comprising:

determining a total notional amount associated with a plurality of swaps having same economics;

comparing the total notional amount to a criterion; and

blending, responsive to the total notional amount meeting the criterion, at least a portion of the plurality of swaps using the first remnant swap and the second remnant swap.

12. The method of claim 1, comprising:

blending, based on a determined fixed rate, at least a portion of the plurality of swaps using the first remnant swap and the second remnant swap on a daily basis; and

communicating, via a network, information corresponding to the first remnant swap and the second remnant swap to a financial institution associated with the plurality of swaps.

13. The method of claim 12, comprising:

communicating, via the network, information corresponding to at least a blended portion of the plurality of the swaps to the financial institution, wherein at least the information corresponding to the first remnant swap and the second remnant swap are to be used to meet a regulatory requirement.

14. A system comprising:

a financial institution computing system comprising a memory storing a portfolio of swaps, the portfolio of swaps comprising a plurality of line items, each of which corresponds to an individual swap;

a network; and

a clearinghouse computing system communicatively coupled to the network, the clearinghouse computing system comprising;

a processor; and

one or more non-transitory memory devices, the one or more non-transitory memory devices storing instructions, that when executed by the processor, cause the clearing house computing system to;

access, via the network, the portfolio of swaps stored in the memory of the financial institution computing system;

monitor, via the network, a size of the portfolio of swaps with respect to a specified criterion, wherein the size of the portfolio of swaps corresponds to a total number of the plurality of line items stored in the portfolio and the specified criterion identifies a maximum number of line items associated with the portfolio stored in the memory;

determine, by the clearinghouse computing system if the size of the portfolio meets the specified criterion, a first blend rate and a second blend rate for use in blending a plurality of swaps, each of the plurality of swaps having matching financial terms and a different associated fixed rate to others of the plurality of swaps, wherein the first blend rate is determined based on rates associated with a first set of swaps of the plurality of swaps and the second blend rate is determined based on rates associated with a second set of swaps of the plurality of swaps;

determine, using one or more computing devices, a first remnant swap corresponding to the first set of swaps of the plurality of swaps using the first blend rate;

determine a second remnant swap corresponding to the second set of swaps of the plurality of swaps using the second blend rate; and

communicate, via the network, information corresponding to the first remnant swap and the second remnant swap to an institution associated with the plurality of swaps, and

replace a plurality of line items associated with the plurality of swaps stored in the memory of the financial institution computing device with a first line item corresponding to the first remnant swap and a second line item corresponding to the second remnant swap.

15. The system of claim 14, wherein the one or more non-transitory memory devices store instructions that, when executed by a processor, cause the one or more computing devices to:

compare at least one metric associated with the plurality of swaps to a specified criterion, wherein the metric comprises a total number of swaps having same economics or a total notional amount associated with the plurality of swaps having same economics; and

responsive to the total notional amount meeting the criterion, blend at least a portion of the plurality of swaps using the first remnant swap and the second remnant swap, the plurality of swaps including one or more payer swaps and one or more receiver swaps.

16. The system of claim 14 wherein the one or more non-transitory memory devices store instructions that, when executed by a processor, cause the one or more computing devices to:

reduce a number of line items associated with a the plurality of swaps to a first line item associated with the first remnant swap and a second line item associated with the second remnant swap.